Molter v. Department of Treasury

I agree with the majority in all aspects save one: the taxation of plaintiff’s interest income. I believe that the operative factor in determining when the state may tax "interest” income is the termination of deferral status of a § 457 plan. At that point, the balance of any deferred compensation, together with any capital appreciation, becomes the unrestricted property of the plan participant. Interest accrued thereafter would be taxable under state law as "interest income.” I would therefore affirm the Court of Appeals decision in its entirety.

Under § 457, "any amount of compensation…